You pay the VAT when you buy something, but when you sell it either domestically or export it, the VAT is refunded.
Sometimes in VAT countries, there is a small amount of the tax not refunded for administration.
The problem with VAT is the huge expense of administering the system that weights on businesses.
Remember, it is a refund, so you can’t get more than you paid.
VAT = Value Added Tax but I call it productivity tax - Businesses that create the most value as compared to their expenses that were subjected to the VAT will pay the highest share of all taxes. VAT is truly is an innovation tax.
Just think what this tax would do to a Software Company, nearly all their expenses will no longer be tax deductible and everything they sold would qualify for almost no refund because they make software.
This explains why the United States has such an advantage in these soft information industries, VAT kills these types of businesses.
You are confusing the European VAT with what Cruz’s Business Tax. The Cruz plan is not a direct consumer tax. It is only paid by any business.
In your example of a software company, their basic deduction would be any purchases from other businesses and capital investments. The 16% would apply to wages and profits, but there would be no payroll tax which is now approx. 15% for SS & Medicare, and no 35% Corporate tax. Individual would only pay 10%.
Good point. VATS should only apply where they help our economy.
Software companies? Not a good idea.
But to be honest, I have trouble fully grasping it quickly.
This is a tough campaign issue to run on.